From Growth Tantrum to Growing Complacency for the Stock Market – Above the 40 (April 16, 2021)

Stock Market Commentary

The growth tantrum is almost a distant memory. Complacency is more the order of the day as the volatility index sinks further below 20 and the S&P 500 (SPY) hops and skips through all-time highs.

Big cap tech is popular again. These stocks are helping to drag both the S&P 500 and the NASDAQ higher and higher. The growing complacency is enough to continue feeding the bullish momentum for now. Indeed, complacency is bullish until it isn’t. In other words, the path of least resistance remains upward and even small dips in uptrends are buyable. In other words, only a definitive and new catalyst can shake the complacency and make the market care about risk again. The timing is impossible to anticipate.

The Stock Market Indices

The S&P 500 (SPY) followed up an uncharacteristically strong week with more buying momentum. The push was not enough to keep the index on its upper Bollinger Band (BB), but it was enough for more all-time highs. The widening gulf between the S&P 500 and its 200-day moving average (DMA) (the blue line below) is one measure of the growing complacency in the stock market.

The S&P 500 (SPY) gained 0.9% and stretched for an all-time high.
The S&P 500 (SPY) peeled away from its upper Bollinger Band but still set all-time highs.

The NASDAQ (COMPQX) is now on a direct trajectory upward, almost a 45 degree angle. Like the S&P 500, the NASDAQ is peeling away from its upper-BB. Still, the buying interest is clear even as the tech-laden index stopped just short of its all-time closing high.

The NASDAQ (COMPQX) gained 0.7% to end a week the strung together a series of all-time highs.
The NASDAQ (COMPQX) stopped just short of its all-time closing high.

The iShares Trust Russell 2000 Index ETF (IWM) is back to struggling. The index of small caps is one place where complacency is on hold. IWM has gone nowhere for 2 1/2 months. The growth tantrum ended for IWM in a kind of double-bottom, but the episode left the index looking a bit exhausted. IWM has pivoted around its 50DMA (the red line below) for almost a month. If IWM breaks below the March lows, it will create a kind of head and shoulders topping pattern. If IWM is going to make a move, I need it to wake up bigtime THIS week as I have a fistful of out-of-the-money call options expiring on Friday.

The iShares Trust Russell 2000 Index ETF (IWM) failed to generate fresh momentum and instead dribbled along its 50DMA.

Stock Market Volatility

The volatility index (VIX) is trending downward again. The 20 level that marks an elevated level of fear is becoming a distant memory as a growing complacency settles into the stock market. The VIX ended the week at a 14-month low which means the last vestiges of the pandemic’s impact on the VIX are gone. As I mentioned in my last Above the 40 post, I am using this growing complacency as an opportunity to refresh (and grow) hedges on the cheap.

The volatility index (VIX) continues to cling to the 20 threshold.
The volatility index (VIX) set a 14-month low as fear continues to fizzle out of the market.

The Short-Term Trading Call for the Big Cap Tech Take-Over from the Growth Tantrum

  • AT40 (T2108) = 57.3% of stocks are trading above their respective 40-day moving averages
  • AT200 (T2107) = 82.5% of stocks are trading above their respective 200-day moving averages (TradingView’s calculation)
  • Short-term Trading Call: cautiously bullish

AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, finally woke up again last week, even if it was just a little. Still, the persistent downtrend for 2021 makes me increasingly wary. As a result, while I am willing to ride the growing complacency with bullish trades, I keep looking over my shoulder with hedges at the ready. Even AT200, the percentage of stocks trading above their respective 200DMAs, is making no progress with a slight decline in place since mid-February. Taken together, the participation in the stock market’s bullish run is narrowing and creating conditions for the next sell-off.

The trading call stays at cautiously bullish until AT40 tests the overbought threshold at 70%. At that point, the trading call would go to neutral. It will go straight to bearish if AT40 fails to break through 70%. I will of course go neutral (or bearish) if the S&P 500 breaks below its 50DMA. Sellers have a LOT of work to do in either case to break the market from its growing complacency.

Stock Chart Video Reviews

Stock Chart Reviews – Below the 50DMA

DoorDash Inc.

After spending almost a month consolidating at all-time lows, DoorDash (DASH) appeared to confirm a bottom. DASH surged two trading days in a row, 9.7% and then 5.2%, to signal the bottom. From there, the stock ground its way toward 50DMA resistance. I am betting that the stock fails to break out on this first approach. With the 20DMA turning upward, the opportunity for staying bearish is likely short. A confirmed 50DMA breakout would of course be bullish and set up DASH for a run to the last breakdown point of $178.

DoorDash Inc. (DASH) decelerated on its approach to 50DMA resistance.

Maxeon Solar Technologies Limited (MAXN)

The selling pressure continues in Maxeon Solar Technologies Limited (MAXN). Last week, the company announced a secondary stock offering valued at $125M. The stock promptly plunged 15.6% on the news. The poor reaction likely forced the hands of Maxeon Solar Technologies given the company priced the private placement at a mere $18/share. MAX closed the week right above the $18 target on extremely high trading volume. According to the rules of trading secondary stock offerings, MAXN is a buy on a bounce away from $18. I already have all the MAXN I want at this point. If not for my longer-term bullishness on companies like MAXN in the solar energy sector, I would have given up on MAXN after the poor post-earnings response.

Maxeon Solar Technologies (MAXN) piled on to the selling pressure with a secondary stock offering.

Discovery (DISCA)

My trade in Discovery (DISCA) is languishing as the stock dribbles ever so slowly downward. The short side of the calendar call spread expired on Friday. However, the remaining long May $55s have little chance of amounting to anything. I am now watching DISCA for a buyable test of 200DMA support.

Discovery (DISCA) sold off most of the week and closed at a 3-month low.


The Coinbase (COIN) IPO caused a lot of excitement. All manner of cryptocurrency plays experienced surges before COIN went public.

Microstrategy (MSTR) drifted higher after the end of the growth tantrum. The day before the COIN IPO, MSTR surged 18.1%. I have been eyeing MSTR for a trade since I wrote about the lessons from the stock’s parabolic run-up. Perhaps as a result I was too hasty in trading last week’s action. I made the mistake of buying MSTR on the “sell the news” reaction without waiting for a successful test of 50DMA support. Instead of waiting for buyers to prove they could hold 50DMA support with a rebound and close higher, I bought MSTR shares at the 50DMA. The stock continued to slice its way downward from there, and I was forced out the position just two days later. MSTR ended the week at 20DMA support (the dotted line below).

Microstrategy (MSTR) suffered mightily from a false 50DMA breakout ahead of the Coinbase (COIN) IPO.

Stock Chart Reviews – Above the 50DMA

Nvidia Corporation (NVDA)

In the middle of the growth tantrum, I opened up a put position in Nvidia Corp (NVDA) as a hedge. I was so focused on the hedge, I missed the bullish implications of the 50DMA breakout after the growth tantrum ended. A week after NVDA confirmed the breakout, the company announced major technical breakthroughs and raised guidance. Subsequently, NVDA jumped 5.6%. The stock has firmly returned to making all-time highs.

Nvidia (NVDA) surged most of the week and hit new all-time highs.

Resolute Forest Products (RFP)

The bullish trading signal in Resolute Forest Products (RFP) is now exceeding my expectations. After consolidating over a month, including a brief 50DMA breakdown, RFP revved up its rally engines all over again. Friday’s 16.5% surge on extremely high volume puts the stock over 40% higher than the last surge above the upper-BB. I could not find company-specific news to explain the high-powered move. I anticipate taking profits in the coming week unless I see news that tells me to keep holding. A reversal of Friday’s move would signal a likely blow-off top.

Resolute Forest Products (RFP) ended the week with a parabolic move to a 16.5% gain and all-time high.

Tesla (TSLA)

As a newly minted crypto-related play, Tesla (TSLA) fared a lot better than Microstrategy. TSLA surged 8.6% the day before the COIN IPO. Like MSTR, the move created a 50DMA breakout. Unlike MSTR, the subsequent sell-the-news pullback did not also reverse the bullish signal. Still, the 50DMA breakout is not confirmed until TSLA manages a close above $763. Like MSTR, I did not wait for such a confirmation before hopping into a bullish position. I have a weekly calendar call diagonal spread ($830/$840) as a bet on a resumption of the rally into or through earnings on April 26th.

Tesla (TSLA) held onto a 50DMA breakout but has yet to confirm the move.

Upstart (UPST)

The trade on the secondary stock offering for Upstart (UPST) looked good for less than a day. The next day UPST promptly broke through the $120 pricing level. After another day of selling, I switched the position to net short by adding a calendar put spread. UPST closed the deal the evening of April 14th. For a brief moment, the 5.6% gain the next day looked like the release of selling overhang. Friday’s reversal quickly erased that interpretation. UPST looks poised to test 50DMA support. A break through support puts in play a fill of last month’s incredible gap higher.

Upstart (UPST) is waning after a secondary stock offering.

Upwork (UPWK)

Gig work company Upwork (UPWK) has spent most of April pivoting around its 50DMA. The stock is tantalizingly close to a fresh buy. It needs to close above $50.40 to confirm last week’s modest 50DMA breakout. This case is one where I am very content to wait for confirmation.

Upwork (UPWK) has yet to confirm its latest 50DMA breakout and spent the week sliding along this support line.

Be careful out there!


“Above the 40” (AT40) uses the percentage of stocks trading above their respective 40-day moving averages (DMAs) to measure breadth in he stock market. Breadth indicates the distribution of participation in a rally or sell-off. As a result, AT40 can identify extremes in market sentiment that are likely to reverse. Above the 40 is my alternative name for “T2108” which was created by Worden. Learn more about T2108 on my T2108 Resource Page. AT200, or T2107, measures the percentage of stocks trading above their respective 200DMAs.

Active AT40 (T2108) periods: Day #122 over 20%, Day #106 above 30%, Day #104 over 40%, Day #11 over 50% (overperiod), Day #16 under 60% (underperiod), Day #35 under 70%

DAILY AT40 (T2108) chart
WEEKLY AT40 (T2108) chart
Black line: AT40 (T2108) (% measured on the right)
Red line: Overbought threshold (70%); Blue line: Oversold threshold (20%). Source: FreestockCharts
Percentage of stocks trading above their respective 200-day moving averages (DMAs) according to (MMTH)

Source for charts unless otherwise noted:

Full disclosure: long UVXY calls, long SPY puts, long UPST shares and put, long DASH put, long IWM calls, long MAXN shares and short put, long TSLA calendar call spread, long RFP, long BTC/USD

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*Charting notes: Stock prices are not adjusted for dividends. Candlestick charts use hollow bodies: open candles indicate a close higher than the open, filled candles indicate an open higher than the close.

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